Ontario cities will have to pay almost half the cost of new affordable housing if they force builders to include it in new developments, under rules the province has just released.

Municipalities have been eagerly waiting for the fine print on “inclusionary zoning,” an idea the Liberal government put into law a year ago. At its most basic, it means that cities have the power to say to a developer that yes, you can build a condo tower here, but a certain number of units have to be priced so people with modest means can buy them.

The idea is to mix cheaper housing into new properties being built anyway, so people, especially families, have more housing options. It’s a bigger deal in Toronto, where prices even in big, dense condo buildings have pushed many people right out of the market, but any city, including Ottawa, can use the rules.

“By making tools like inclusionary zoning available to our local partners, we’re making it easier to create affordable housing while working towards our bold, long-term goal of ending homelessness in Ontario,” said Chris Ballard, the minister of housing at the time.

Easier. But definitely not easy.

First of all, the rules won’t apply to new rental buildings. Only to new condos and houses being built for sale, and only in developments of 20 units or more. So a condo tower or a subdivision would count; redeveloping two downtown houses into a six- or eight-unit building wouldn’t.

Second, new regulations limit the affordable-housing quota to five per cent of the units in a new development — 10 per cent if it’s in a high-density district served closely by transit, like the neighbourhood around a light-rail station.

What counts as “affordable” will have to be spelled out in city planning documents, using a formula updated regularly and reported to the province, and based on average prices of various kinds of new housing and average income levels.

That math will be especially important because a city that wants to use inclusionary zoning will have to cover 40 per cent of the difference between the market price of a unit designated under the rules and the “affordable” price. We’re talking tens of thousands of dollars for each unit, possibly more if it’s a high-end building.

The developer would have to eat the rest, or pass it on to the other buyers in the development, but the city wouldn’t get affordable housing for free.

Cities could pay the subsidy, which the regulations calls an “incentive”, by waiving any number of fees and charges ordinarily attached to new building projects, including ones that pay for roads, sewer pipes, better parks and transit construction for the new residents. They could also abandon minimum parking requirements they usually apply to new construction.

Furthermore, each affordable unit would be taken out of the calculations of the separate financial bonus that municipal governments can extract from builders when they get favourable rezonings, money that’s meant to be spent on general community improvements.

Here’s a thing that’s already happened in Ottawa. A few years ago, the city made up a new long-term plan for Centretown, a “community design plan” that said where new condo towers ought to go and how we should do things like encourage new commercial developments on Bank and Elgin streets. But, having spent years on that work, the city chose not to turn that plan into precise zoning for the district, which is supposed to be the second step.

Why? Because under provincial law, the city can only get those separate financial bonuses when it rezones a property at a developer’s request, not when it just updates its zoning code to match its development plans. Having coherent rules that all play well together would mean giving up the neighbourhood benefits those rezoning payments are supposed to cover.

These inclusionary-zoning rules create a new layer of perverse incentives. For instance, Ottawa is reasonably happy to let builders go with very little parking in new developments, especially near transit stations. It’s part of discouraging driving and making the city more walkable. But now there’ll a strong motivation to demand a lot of parking, just so the requirement can be traded away in exchange for affordable units.

So there’s a new tool here for cities to address housing shortages, but it’s not a big hammer. The province is taking comments on the rules until Feb. 1.

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Reevely: New 'inclusionary zoning' rules will make affordable housing easier, but not a cinch